If you are focusing on the debt ceiling and the ramifications of it not getting approved before August 2nd, you are focusing on the wrong thing. More importantly is why it needs to be increased and why it has been increased so many times (74 times since 1962). We have to peel the onion one or more layers to solve the problem.
The Debt Ceiling
The debt ceiling is currently set at $14.3 trillion and the government hit this cap on May 16, but the Treasury made adjustments to have enough room to borrow through Aug. 2. Here is how this works: The government borrows money to make up the difference between what it spends and what it takes in. The amount of debt it can have is controlled and is called the debt ceiling, a cap set by Congress on the amount of debt the federal government can legally borrow.
This applies to U.S. bonds plus debt owed to federal government trust funds such as those for Social Security and Medicare. The money you have paid into these latter two funds is then transferred into a general fund and spent. So its not so much that these programs are underfunded, its that the government has taken (borrowed) the money to spend elsewhere.
The debt ceiling is not a new issue, and raising the debt ceiling has actually become a common practice by Congress. The debt ceiling has been raised 74 times since March 1962. That, under the strictest rules of statistics, constitutes a trend. That is what needs to be focused on, or What the Heck is Happening?
Congress and President Obama have not reached an agreement on the debt ceiling, so the political drama continues. What is unfortunate is that they are overly focused on the FUD Factor and political posturing. FUD stands for Fear, Uncertainty and Doubt. Its an old marketing technique to stimulate people into buying products and is similarly used by politicians to influence opinions. It is also a technique to create a distraction, which in this case is to distract the public from the real issue: Why the debt ceiling has been raised 74 times since March 1962.
The Real Game
Time spent on creating business incentives that create value, jobs and competitiveness in the long-term is where time would be better spent. Not only should we be focused on lowering the unemployment but also on getting more people into the workplace along with creating more value and productivity. Money spent on increasing skills, i.e. a tax incentive to do so, would increase the contribution value of the individual. Government should be proactively encouraging growth and removing barriers as much as possible. Have you really heard of or seen any significant efforts to do these, what or where is the plan?
These things would increase our competiveness and in doing so would increase our GDP, which would increase tax revenues. Increased tax would provide more money to invest into more revenue generating opportunities, lower our debt and stop all these crisis issues from occurring. Sounds like a win-win to me. There is something to be said about good fiscal management at the personal, business and government level.
Don Redinius, Author - The New Era of Financial Success, Process Management for Team Members and a contributing author to Six Sigma for Dummies.